Regulatory News:
TechnipFMC plc (“TechnipFMC”) (Paris: FTI) (NYSE: FTI)
(ISIN: GB00BDSFG982) announces that on 24 February 2017, it has
filed with the U.S. Securities and Exchange Commission (“SEC”) a
Current Report on Form 8-K/A that includes the following documents:
(i) unaudited pro forma condensed combined financial information as
of and for the year ended December 31, 2016 (US GAAP) for
TechnipFMC, the combined company after giving effect to the
business combination of FMC Technologies, Inc. and Technip S.A.,
which are appended hereto; (ii) audited 2016 consolidated financial
statements (US GAAP) for FMC Technologies, Inc.; and (iii) audited
2016 consolidated financial statements (IFRS) for Technip S.A. No
combined IFRS financial statements or reconciliation to IFRS of
financial statements prepared under US GAAP will be provided.
A copy of the Current Report on Form 8-K/A can be found on the
SEC website
(https://www.sec.gov/Archives/edgar/data/1681459/000168145917000138/0001681459-17-000138-index.htm)
and on the TechnipFMC website
(http://investors.technipfmc.com/phoenix.zhtml?c=254471&p=irol-sec).
A copy of the Form 8-K/A has been submitted to the National
Storage Mechanism on the date of this announcement and is, or will
shortly be, available for inspection at
http://www.morningstar.co.uk/uk/NSM.
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information, which we refer to as the pro forma financial
statements, give effect to the Mergers, as defined in "Description
of the Mergers" in the Notes to the Unaudited Pro Forma Condensed
Combined Financial Information, accounted for under the acquisition
method of accounting in accordance with Accounting Standards
Codification 805, Business Combinations (“ASC 805”), with Technip
identified as the accounting acquirer. ASC 805 provides that in
identifying the acquiring entity, all pertinent facts and
circumstances must be considered, including, but not limited to,
the relative voting rights of the stockholders of the constituent
companies in the combined company, significant minority voting
interest, the composition of the board of directors and senior
management of the combined company, the terms of the exchange of
equity securities in the business combination, including the
payment of any premium, and the relative size of each company.
After careful consideration of all of the company-specific facts,
the merger-related facts and the business combination agreement,
FMC Technologies, Inc ("FMCTI") and Technip S.A. ("Technip")
determined that the factors were neutral to or supportive of the
conclusion that Technip is the accounting acquirer. The factors
that most notably supported this determination were (i) the
relative voting interest of Technip and FMCTI in the combined
company whereby the Technip stockholders obtained a majority voting
interest of approximately 51%, (ii) the minority voting interest
and (iii) the relative size of FMCTI’s and Technip’s revenue, total
assets, workforce and global footprint.
The unaudited pro forma condensed combined statement of income
has been prepared to give effect to the Mergers as if they had been
completed on January 1, 2016. The unaudited pro forma
condensed combined balance sheet has been prepared to give effect
to the Mergers as if they had been completed on December 31,
2016.
The pro forma financial statements are based on the historical
audited consolidated financial position and results of operations
of Technip and FMCTI as of and for the year ended December 31,
2016.
U.S. GAAP requires that, for each business combination, one of
the combining entities be identified as the acquirer, and the
existence of a controlling financial interest be used to identify
the acquirer in a business combination. In a business combination
effected primarily by exchanging equity interests, the acquirer
usually is the entity that issues its equity interests. However,
under certain circumstances, the acquirer for accounting purposes
may not necessarily be the legal acquirer (i.e., the entity that
issues its equity interest to effect the business combination). As
discussed above, Technip was determined to be the acquirer for
accounting purposes. As a result, the Mergers will be accounted for
as an acquisition of FMCTI by Technip. Accordingly, FMCTI’s
tangible and identifiable intangible assets acquired and
liabilities assumed will be recorded at fair value at the date of
completion of the Mergers, with the excess of the purchase
consideration over the fair value of FMCTI’s net assets being
recorded as goodwill. The Technip assets and liabilities together
with Technip operations will continue to be recorded at their
pre-combination historical carrying value for all periods presented
(including pre-combination) in the consolidated financial
statements of the combined company. After January 16, 2017, the
date of the completion of the Mergers ("Merger Date"), the results
of operations of both companies will be included in the
consolidated financial statements of the combined company.
Valuations of property, plant and equipment, and intangible and
other assets acquired and liabilities assumed, along with
assessments of favorable and unfavorable leases, are preliminary as
management is still reviewing the existence, characteristics and
assumptions related to FMCTI’s assets acquired and liabilities
assumed. Estimates and assumptions are subject to change upon
finalization of these preliminary valuations as of the Merger Date.
The completion of the fair valuation analyses could result in
significantly different depreciation and amortization expenses and
balance sheet classifications.
The pro forma financial statements were prepared in accordance
with Article 11 of Securities and Exchange Commission ("SEC")
Regulation S-X. The pro forma adjustments reflecting completion of
the Mergers are based upon the acquisition method of accounting in
accordance with U.S. GAAP, and upon the assumptions set forth in
the notes to the pro forma financial statements.
The historical financial information of FMCTI are reported
pursuant to U.S. GAAP and presented in U.S. dollars. The historical
financial information of Technip are reported pursuant to IFRS as
issued by the IASB and presented in Euro. The audited consolidated
financial statements used in the preparation of the pro forma
financial statements include adjustments and reclassifications to
convert the balance sheet and statement of income of Technip from
IFRS as issued by the IASB to U.S. GAAP and to translate the
financial statements from Euro to U.S. dollars. Management will
conduct further review of adjustments and reclassifications to
convert Technip financial statements from IFRS to U.S. GAAP, and as
a result, management may identify further differences that could
have a material impact to the pro forma financial statements.
The historical financial data has been adjusted to give pro
forma effect to events that are (1) directly attributable to
the Mergers, (2) factually supportable, and (3) with
respect to the statements of income, expected to have a continuing
impact on the combined results. The pro forma financial statements
do not reflect any revenue enhancements, anticipated synergies or
dis-synergies, operating efficiencies or cost savings that may be
achieved. The fair value adjustments applied to the assets acquired
and liabilities assumed reflected in the pro forma financial data
is preliminary and is based on management’s estimates of the fair
value and useful lives of the assets acquired and liabilities
assumed. The pro forma financial statements do not include any fair
value adjustments associated with the tangible fixed assets of
FMCTI as management has preliminarily concluded that the historical
carrying value of the assets approximates the current fair market
value. Accordingly, the actual financial position and results of
operations may differ from these pro forma amounts as additional
information becomes available and as additional analyses are
performed. The final valuations may result in material changes to
the preliminary estimated purchase price allocation.
The pro forma adjustments are subject to modification depending
on changes in the final fair value determination for assets
acquired and liabilities assumed and as additional information
becomes available and additional analyses are performed. The final
allocation of the total purchase accounting will be determined
after completion of thorough analyses to determine the fair value
of FMCTI’s tangible and identifiable intangible assets acquired and
liabilities assumed as of the Merger Date. Increases or decreases
in the fair values of the net assets as compared with the
information shown in the pro forma financial statements may change
the amount of the total purchase consideration allocated to
goodwill, if any, and other assets and liabilities and may impact
the combined company statements of income due to adjustments in
amortization of the adjusted assets or liabilities. Any changes to
FMCTI’s equity, including results of operations from
December 31, 2016 through the Merger Date, will also change
the purchase accounting, which may include the recording of a lower
or higher amount of goodwill. The final adjustments may be
materially different from the pro forma financial statements
presented herein.
The pro forma financial statements are not intended to represent
or be indicative of the consolidated results of operations or
financial position that would have been reported had the Mergers
been completed as of the dates presented, and should not be taken
as representative of the future consolidated results of operations
or financial position of the combined company following the
Mergers. The actual financial position and results of operations of
the combined company following the Mergers may significantly differ
from the pro forma financial statements reflected herein due to a
variety of factors. The pro forma financial statements are based
upon available information and certain assumptions that management
believes are reasonable.
UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEETAS OF DECEMBER 31, 2016
Historical
Technip
(Note 4a)
Historical
FMCTI
(Note 4b)
Purchase
Accounting
Adjustments
Notes Other
Adjustments
Notes Pro Forma
Condensed
Combined
(In millions of U.S. dollars) Assets Cash and cash
equivalents $ 6,269.4 $ 1,015.9 $ — $ 15.9 4(i) $ 7,301.2 Trade
receivables 2,024.5 709.4 — (33.9 ) 4(i) 2,700.0 Costs and
estimated earnings in excess of billings on uncompleted contracts
485.7 612.2 — 18.5 4(i) 1,116.4 Inventories 334.7 594.1 — 0.2 4(i)
929.0 Financial instruments 238.0 44.5 — — 282.5 Prepaid expenses —
36.7 — (36.7 ) 4(h) — Income taxes receivable 265.0 135.4 — — 400.4
Other current assets 1,510.7 172.6 — 36.7 4(h) 1,726.4
6.4 4(i) Total current assets 11,128.0
3,320.8 — 7.1 14,455.9 Investments in equity affiliates 177.8 — —
21.7 4(i) 199.5 Investments 14.1 85.9 — — 100.0 Other financial
assets 236.0 — (28.8 ) 4(i) 207.2 Property, plant and equipment,
net 2,620.1 1,262.7 — 0.2 4(i) 3,883.0 Goodwill 3,718.4 517.9
4,835.1 3,4(f), 4(g) — 9,071.4 Intangible assets, net 255.4 274.0
1,211.8 4(c) — 1,741.2 Deferred income taxes 599.5 204.9 — 6.3 4(i)
810.7 Financial instruments — 7.4 — — 7.4 Other assets —
75.0 — — 75.0
Total assets $ 18,749.3
$ 5,748.6 $ 6,046.9 $ 6.5 $ 30,551.3
Liabilities and equity Short-term debt and current portion
of long-term debt $ 894.4 $ 317.3 $ — $ — $ 1,211.7 Accounts
payable, trade 3,883.3 351.6 40.5 4(g) — 4,266.9 (8.5 ) 4(i)
Advance payments 411.1 384.2 — — 795.3 Billings in excess of costs
and estimated earnings on uncompleted contracts 3,364.5 108.0 — —
3,472.5 Accrued payroll — 171.7 — (171.7 ) 4(h) — Financial
instruments 586.7 63.6 — — 650.3 Income taxes payable 317.5 104.0 —
— 421.5 Other current liabilities 2,099.3 290.9 — 171.7 4(h)
2,576.5 14.6 4(i) Total current
liabilities 11,556.8 1,791.3 40.5 6.1 13,394.7 Long-term debt, less
current portion 1,658.5 908.1 — — 2,566.6 Accrued pension and other
post-retirement benefits, less current portion 202.2 198.8 — —
401.0 Financial instruments — 14.2 — — 14.2 Deferred income taxes
153.8 128.6 447.2 4(d) 0.4 4(i) 730.0 Other liabilities 117.2 81.1
— — 198.3 Commitments and contingent liabilities — Stockholders’
equity: Share capital / common stock 95.8 2.9 (2.9 ) 4(e) (95.8 )
4(h) 466.6 466.6 4(h) Common stock held in employee benefit trust —
(6.5 ) 6.5 4(e) — — Treasury stock (23.3 ) (1,636.6 ) 1,636.6 4(e)
23.3 4(h) — Capital in excess of par value of common stock 2,252.2
773.0 (773.0 ) 4(e) 95.8 4(h) 10,029.2 8,171.1 4(f) (466.6 ) 4(h)
(23.3 ) 4(h) Retained earnings 2,705.7 4,288.8 (4,288.8 ) 4(e) —
2,705.7 — Accumulated other comprehensive loss 42.1 (809.7 )
809.7 4(e) — 42.1 Total stockholders’ equity 5,072.5
2,611.9 5,559.2 — 13,243.6 Noncontrolling interests (11.7 ) 14.6
— — 2.9 Total equity 5,060.8 2,626.5
5,559.2 — 13,246.5
Total liabilities and
equity $ 18,749.3 $ 5,748.6 $ 6,046.9 $
6.5 $ 30,551.3
See accompanying Notes to Unaudited Pro Forma
Condensed Combined Financial Information.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF INCOMEFOR THE YEAR ENDED DECEMBER 31,
2016
Historical
Technip
(Note 5a)
Historical
FMCTI
Note (5b)
Purchase
Accounting
and Other
Adjustments
Notes Pro Forma
Condensed
Combined
Notes (In millions of U.S. dollars, except per
share data) Revenue $ 9,199.6 $ 4,542.3 $ 36.5 5(f) $
13,756.0 (22.4 ) 5(h) Costs and expenses Cost of revenue 7,639.9
3,528.1 196.6 5(c) 11,376.7 12.1 5(h) Selling, general and
administrative expense 572.6 581.7 (6.9 ) 5(h) 1,147.4 Research and
development expense 105.5 114.1 6.3 5(h) 225.9 Restructuring and
impairment expense 410.7 92.9 (157.5 ) 5(d) 346.1 Merger
transaction and integration costs — 45.2 (45.2 ) 5(d)
— Total costs and expenses 8,728.7 4,362.0 5.4 13,096.1
Other income (expense), net (16.9 ) (23.7 ) 25.7 5(f) (14.9 ) Share
of income/(loss) of equity affiliates 108.8 — (36.5 ) 5(f) 99.9
27.6 5(h) Income before financial
income/(expense), net and income taxes 562.8 156.6 25.5 744.9
Financial income/(expenses), net (34.7 ) (30.0 ) (25.7 ) 5(f) (87.9
) 2.5 5(h) Income before income taxes
528.1 126.6 2.3 657.0 Provision for income taxes 133.9 79.5 (20.6 )
5(e) 189.0 (3.8 ) 5(h) Income from continuing
operations 394.2 47.1 26.7 468.0 Loss from discontinued operations,
net of income tax — (10.1 ) — (10.1 ) Net income $
394.2 $ 37.0 $ 26.7 $ 457.9 Net
income/(loss) attributable to Technip / FMCTI, respectively $ 428.7
$ 38.4 $ 26.7 493.8 Net income/(loss) attributable to
noncontrolling interests (34.5 ) (1.4 ) (35.9 ) Earnings per share
attributable to Technip / FMCTI, respectively Basic $ 3.59 $ 0.17 $
1.06 Diluted $ 3.49 $ 0.17 $ 1.05 Weighted average shares
outstanding to Technip / FMCTI, respectively Basic 119.4 227.2
466.6 5(g) Diluted 125.1 228.6 478.0 5(g)
See accompanying Notes to Unaudited Pro Forma
Condensed Combined Financial Information.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
1. Description of Mergers
On June 14, 2016, FMC Technologies and Technip entered into a
definitive business combination agreement providing for the
business combination among FMC Technologies, FMC Technologies SIS
Limited, a private limited company incorporated under the laws of
England and Wales and a wholly-owned subsidiary of FMC
Technologies, and Technip. On August 4, 2016, FMC Technologies SIS
Limited changed its name to TechnipFMC Limited and was subsequently
re-registered under the laws of England and Wales on January 11,
2017 as TechnipFMC plc (“TechnipFMC”). On December 5, 2016, the
definitive business combination agreement was approved by the
shareholders of both FMC Technologies and Technip.
On January 16, 2017, the business combination was completed.
Pursuant to the terms of the definitive business combination
agreement, Technip merged with and into TechnipFMC, with TechnipFMC
continuing as the surviving company (the “Technip Merger”), and
each ordinary share of Technip (the “Technip Shares”), other than
Technip Shares owned by Technip or its wholly-owned subsidiaries,
were exchanged for 2.0 ordinary shares of TechnipFMC, subject
to the terms of the definitive business combination agreement.
Immediately following the Technip Merger, a wholly-owned indirect
subsidiary of TechnipFMC (“Merger Sub”) merged with and into FMC
Technologies, with FMC Technologies continuing as the surviving
company and as a wholly-owned indirect subsidiary of TechnipFMC
(the “FMCTI Merger” and together with the Technip Merger, the
"Mergers"), and each share of common stock of FMC Technologies (the
“FMCTI Shares”), other than FMCTI Shares owned by FMCTI,
TechnipFMC, Merger Sub or their respective wholly-owned
subsidiaries, were exchanged for 1.0 ordinary share of
TechnipFMC, subject to the terms of the definitive business
combination agreement.
2. Basis of Presentation
The unaudited pro forma condensed combined financial information
are based on Technip’s and FMCTI’s historical consolidated
financial statements as adjusted to give pro forma effect to the
acquisition of FMCTI by Technip. The pro forma effects relate to
events that are (i) directly attributable to the Mergers,
(ii) factually supportable, and (iii) with respect to the
unaudited pro forma condensed combined statement of income,
expected to have a continuing impact on the combined results. The
pro forma adjustments are preliminary and based on estimates of the
fair value and useful lives of the assets acquired and liabilities
assumed and have been prepared by TechnipFMC management to
illustrate the estimated effect of the Mergers and certain other
adjustments. The final determination of the purchase accounting
will be based on the fair values of the FMCTI assets acquired and
liabilities assumed at the Merger Date. The unaudited pro forma
combined financial statement of income for the year ended
December 31, 2016 gives effect to the acquisition of FMCTI as
if it had occurred on January 1, 2016. The unaudited pro forma
combined balance sheet as of December 31, 2016 gives effect to the
acquisition of FMCTI as if it has occurred on December 31,
2016.
Technip’s historical results are derived from Technip’s audited
consolidated balance sheet as of December 31, 2016, and
audited consolidated statement of income for the year ended
December 31, 2016 prepared in accordance with IFRS as issued
by the IASB. FMCTI’s historical results are derived from the
audited consolidated balance sheet as of December 31, 2016 and
audited consolidated statement of income for the year ended
December 31, 2016 prepared in accordance with U.S. GAAP. The
audited financial statements and accompanying notes, which are an
integral part of the consolidated financial statements, are
attached as Exhibit 99.1 and 99.3 for FMCTI and Technip,
respectively, and should be carefully read in conjunction with the
unaudited pro forma condensed combined financial information.
Subsequent to the Merger Date, the combined company owned 100%
of Forsys Subsea, the 50/50 joint venture between FMCTI and
Technip, which started its operations in June 2015. Pro forma
adjustments have been reflected in the unaudited pro forma
financial information to consolidate Forsys Subsea.
Subsequent to the Merger Date, any transactions occurring
between Technip and FMCTI will be intercompany transactions and
eliminated in the preparation of consolidated financial statements.
Balances and transactions between Technip and FMCTI as of December
31, 2016 and for the year then ended are not significant;
therefore, no eliminations were made in the pro forma financial
statements.
On a preliminary basis, the intangible assets and goodwill
recognized in the preliminary purchase price accounting have been
considered as non-deductible for tax purposes. Accordingly, a
deferred tax liability has been recognized at a rate of 35% on
intangible assets acquired.
Significant Accounting Policies
As a domestic registrant under SEC rules, the pro forma
financial information of TechnipFMC is prepared in accordance with
U.S. GAAP. The accounting policies of TechnipFMC under U.S. GAAP
used, on a preliminary basis, in the preparation of these unaudited
pro forma condensed combined financial information are those set
forth in FMCTI’s audited financial statements included in Exhibit
99.1, with respect to FMCTI and those of Technip to the extent
Technip accounting policies comply with U.S. GAAP.
The accounting policies of Technip under IFRS as described in
Note 1 to the historical consolidated financial statements included
in Exhibit 99.3 are similar in most material respects to U.S. GAAP,
except for those discussed further in Note 6 below, which also
discloses the translation from Euro amounts into U.S. dollars.
Although TechnipFMC management believes the adjustments to
Technip’s financial statements represent the known material
adjustments to conform to U.S. GAAP, the accompanying unaudited pro
forma IFRS to U.S. GAAP adjustments are preliminary and are subject
to further adjustments as additional information becomes available
and as additional analyses are performed.
3. Calculation of Purchase Consideration
FMCTI stockholders received TechnipFMC shares as purchase
consideration in connection with the Mergers as discussed above;
however, because Technip is the accounting acquirer and FMCTI is
the acquiree for accounting purposes, the pro forma financial
statements reflect the estimated fair value of the equity issued,
as represented by the market price of Technip shares, to FMCTI
stockholders. The total purchase consideration received by FMCTI
stockholders was based on the fair value of the equity issued at
the effective time of the Mergers. The estimated purchase
consideration below reflects the estimated fair value of equity
issued, which is based on the January 16, 2017 closing price of
Technip shares of $71.40 per share.
The estimated purchase consideration and estimated fair value of
FMCTI’s net assets acquired on January 16, 2017 is calculated as
follows:
(In millions, except value per share data and FMCTI exchange
ratio) Total FMCTI shares subject to exchange as of
January 16, 2017 228.9 FMCTI exchange ratio(i) 0.5 Shares of
TechnipFMC issued 114.4 Value per share of Technip as of January
16, 2017(ii) $ 71.40 Estimated purchase consideration $ 8,171.1
(i) As the calculation is deemed to reflect a
share capital increase of the accounting acquirer, the FMCTI
exchange ratio (1 share of TechnipFMC for 1 share of FMCTI as
provided in the business combination agreement) is adjusted by
dividing the FMCTI exchange ratio by the Technip exchange ratio (2
shares of TechnipFMC for 1 share of Technip as provided in the
business combination agreement) i.e. 1 ⁄ 2 = 0.5 in order to
reflect the number of shares of Technip that FMCTI stockholders
would have received if Technip was to have issued its own
shares.
(ii) Closing price of Technip’s common stock
on Euronext Paris on January 16, 2017 in Euro converted at the Euro
to U.S. dollar exchange rate of $1.0594 on January 16, 2017.
Preliminary Purchase Accounting
Under the acquisition method of accounting, the FMCTI assets and
liabilities will be recorded at fair value as of the Merger Date
and combined with the historical carrying amount of the assets and
liabilities of Technip. The pro forma adjustments are preliminary
and based on estimates of the fair value and useful lives of the
assets as of December 31, 2016 and have been prepared by
TechnipFMC management to illustrate the estimated effect of the
Mergers. The unaudited pro forma condensed combined financial
information does not include any fair value adjustments associated
with tangible fixed assets and other current assets and liabilities
of FMCTI as TechnipFMC management has preliminary concluded that
these historical carrying values approximate their fair values as
of December 31, 2016. The purchase accounting is dependent upon
certain valuation and other studies that have not yet been
completed. Accordingly, the preliminary purchase accounting is
subject to further adjustments as additional information becomes
available and as additional analyses and final fair valuations are
conducted at and following the completion of the Mergers. The final
fair valuations could differ materially from the preliminary fair
valuations presented below and, as such, no assurances can be
provided regarding the preliminary purchase accounting.
The following table summarizes the preliminary purchase
accounting consideration to the identifiable assets acquired and
liabilities assumed of FMCTI, with the excess of the purchase
consideration issued over the fair value of FMCTI’s net assets
recorded as goodwill:
(In millions) Calculation of goodwill: Fair
value of common shares issued to FMCTI stockholders $ 8,171.1
Recognized amounts of identifiable assets acquired and
liabilities assumed: Total assets acquired 5,748.6 Less: Total
liabilities assumed (3,136.7 ) Book value of net assets acquired as
of December 31, 2016 2,611.9 Less: transaction costs to be incurred
after December 31, 2016 by FMCTI (40.5 ) Less: write-off of
pre-existing FMCTI goodwill (517.9 ) Less: write-off of
pre-existing FMCTI intangible assets (218.2 ) Less: write-off of
deferred tax of pre-existing FMCTI goodwill and intangible assets
53.3
Adjusted net book value of assets acquired
1,888.6 Identifiable intangible assets at fair value 1,430.0
Deferred tax impact of fair value adjustments (500.5 )
Goodwill 5,353.0 Pre-existing FMCTI goodwill (517.9 ) Net
adjustment to goodwill $ 4,835.1
The unaudited pro forma condensed combined financial information
does not include any fair value adjustments associated with the
tangible fixed assets of FMCTI as TechnipFMC management have
preliminarily concluded that the historical carrying value of the
assets approximates the fair value as of December 31, 2016.
TechnipFMC management will continue to assess the tangible fixed
assets through the purchase accounting measurement period under
U.S. GAAP. The actual purchase accounting may differ materially
from these pro forma amounts as additional information becomes
available and as additional analyses are performed.
4. Notes to Unaudited Pro Forma Condensed Combined
Balance Sheet
(a) Represents the audited historical
consolidated balance sheet of Technip as of December 31, 2016
as adjusted and reclassified to conform to U.S. GAAP (see Note
6).
(b) Represents the audited historical
consolidated balance sheet of FMCTI as of December 31,
2016.
(c) Represents the net adjustment to FMCTI
intangible assets based on the estimated fair value of the
intangible assets as discussed in Note 3. The net adjustment to
intangible assets is calculated as follows:
(In millions of dollars, except estimated useful lives)
Estimated
Useful Life
Amount Identifiable intangible assets Customer
relationships 15 $ 630.0 Backlog 2 290.0 Acquired technology 10
180.0 Tradenames 20 330.0 Estimated fair value of identified
intangible assets 1,430.0 Pre-existing FMCTI intangible assets
(218.2 ) Net adjustment to intangible assets $ 1,211.8
(d) Represents the $500.5 million adjustment
to deferred tax liabilities, on a preliminary basis, resulting from
the pro forma fair value adjustments for intangible assets acquired
utilizing the U.S. Federal statutory tax rate of 35% and the $53.3
million adjustment to eliminate deferred tax liabilities included
in FMCTI’s historical balance sheet related to goodwill and
intangible assets associated with FMCTI’s pre-merger business
combinations.
(e) Represents adjustments to eliminate FMCTI
historical equity accounts as FMCTI is the acquiree for accounting
purposes.
(f) Represents adjustments to record the fair
value of equity consideration in TechnipFMC transferred to FMCTI
stockholders to effectuate the Mergers.
(g) Represents an estimate of the future
costs of $40.5 million to be incurred by FMCTI directly
attributable to the Mergers, including advisory and legal fees that
are recorded as an adjustment to the unaudited pro forma condensed
combined balance sheet only. These amounts were expensed as
incurred during the period January 1, 2017 through January 16, 2017
and are not reflected in the unaudited pro forma condensed combined
statements of income because they have not yet been incurred for
the accompanying period presented and they will not have a
continuing impact.
(h) Represents certain reclassifications of
historical FMCTI and Technip financial statement line items to
conform to the expected financial statement line items of the
combined company following the Mergers, including:
- Prepaid expenses has been reclassified
to Other current assets;
- Accrued payroll has been reclassified
to Other current liabilities; and
- Technip historical Share Capital has
been eliminated and TechnipFMC Share Capital of $466.6 million as
of December 31, 2016 has been recorded.
- Technip historical Treasury Stock has
been eliminated based on the shares issued by TechnipFMC to all
outstanding shareholders of Technip as a result of the
Mergers.
(i) Represents adjustments to consolidate
Forsys Subsea, the 50/50 joint venture between FMCTI and
Technip.
5. Notes to Unaudited Pro Forma Condensed Combined
Statements of Income
(a) Represents the historical consolidated
statement of income for Technip for the year ended
December 31, 2016 (see Note 6).
(b) Represents the historical consolidated
statement of income for FMCTI for the year ended December 31,
2016.
(c) Represents the adjustments to record
amortization expense related to the increased basis of intangible
assets to $1,430.0 million (see Note 4c), which have been recorded
at estimated fair value on a pro forma basis and will be amortized
over the estimated useful lives on a straight-line basis as
provided for each class of intangible asset. The net adjustment to
amortization expense is calculated as follows:
(In millions) Estimated
Fair Value
Fiscal Year Ended
December 31, 2016
Amortization of acquired finite-lived intangible assets $ 1,430.0 $
221.5 Less: FMCTI historical intangible asset amortization expense
(24.9 ) Net adjustment to amortization expense $ 196.6
A 10% increase/decrease in the fair value
attributable to identified intangible assets would result in an
increase/decrease in annual amortization expense of approximately
$22.2 million. TechnipFMC's management believes that using a 10%
threshold in the sensitivity analysis is the appropriate magnitude
given the relative size of the respective adjustments compared to
the pro forma total assets and would demonstrate a meaningful
impact on the unaudited pro forma condensed combined statements of
income.
(d) Represents the adjustment to eliminate
merger-related transaction costs expensed in FMCTI’s and Technip’s
historical consolidated statement of income. As merger-related
transaction costs are non-recurring, direct, incremental costs of
the specific acquisition, which are reflected in the historical
financial information, they have not been reflected in the
unaudited pro forma condensed combined statements of income. An
adjustment totaling $202.7 million has been reflected in the
unaudited pro forma condensed combined statements of income that
were expensed by FMCTI of $45.2 million and Technip of $157.5
million for the twelve months ended December 31, 2016.
(e) Represents the tax effect of purchase
accounting adjustments utilizing the U.S. Federal statutory tax
rate of 35% on a preliminary basis. Merger-related transaction
costs in FMCTI’s and Technip’s historical consolidated statement of
income eliminated as pro forma adjustments were tax affected in
accordance with their respective jurisdictions, as applicable.
(f) Represents certain reclassifications of
historical FMCTI financial statement line items to conform to the
expected financial statement line items of the combined company
following the Mergers, including:
- Foreign currency remeasurement gains
and losses recorded in Other income / (expense), net has been
reclassified to Financial income / (expense), net
- Equity method income (losses) recorded
in Revenue has been reclassified to Share of income/(loss) of
equity affiliates.
(g) Represents an adjustment to the weighted
average shares outstanding for both Technip and FMCTI to illustrate
the number of TechnipFMC shares exchanged to consummate the
Mergers. The pro forma number of shares outstanding for the
unaudited pro forma condensed combined statement of income
represents the total number of TechnipFMC shares exchanged on the
Merger Date to Technip and FMCTI stockholders and utilizing
dilutive securities of Technip for the year ended December 31,
2016. The pro forma number of shares outstanding was calculated as
follows:
(In millions, except per share data and Technip and FMCTI
exchange ratio) TechnipFMC Shares exchanged for Technip
shares Technip Basic Shares Outstanding-Basic(i) 118.9
Technip Exchange Ratio(ii) 2.0 TechnipFMC shares exchanged for
Technip shares-Basic 237.7 Technip Dilutive Shares
Outstanding-Dilutive(iii) 5.7 Technip Exchange Ratio(ii) 2.0
TechnipFMC shares exchanged for Technip shares-Dilutive 11.4 249.1
TechnipFMC shares exchanged for FMCTI shares FMCTI Shares
outstanding(iv) 228.9 FMCTI Exchange Ratio(v) 1.0 TechnipFMC shares
to be exchanged for FMCTI shares 228.9 TechnipFMC Shares
exchanged for the year ended December 31, 2016-Basic 466.6
TechnipFMC Shares exchanged for the year ended December 31,
2016-Diluted 478.0
(i) Number of shares of Technip common stock
issued and outstanding, excluding treasury shares, as of January
16, 2017, which were exchanged for TechnipFMC shares.
(ii) Per the business combination agreement,
each option to purchase or subscribe for Technip shares granted
under the employee and director stock plans of Technip, whether
vested or unvested, that is outstanding immediately prior to the
Technip Merger shall cease to represent a right to acquire Technip
shares and shall be converted, at the time of the Technip Merger,
into a TechnipFMC stock option on the same terms and conditions as
were applicable to such Technip stock option immediately prior to
the acquisition date.
(iii) Number of dilutive Technip Shares based
on the weighted average share calculation for the year ended
December 31, 2016.
(iv) Number of shares of FMCTI common stock
issued and outstanding, excluding treasury shares, as of January
16, 2017, which were exchanged for TechnipFMC Shares.
(v) Per the business combination agreement,
each option to purchase or subscribe for FMCTI Shares granted under
the Amended and Restated FMCTI Incentive Compensation and Stock
Plan, whether vested or unvested, that was outstanding immediately
prior to the FMCTI Merger ceased to represent a right to acquire
FMCTI Shares and was converted, at the FMCTI Merger, into a
TechnipFMC stock option on the same terms and conditions as were
applicable to such FMCTI stock option immediately prior to the
FMCTI Merger. Each Vesting FMCTI equity right immediately vested
and was earned and payable pursuant to its terms immediately prior
to the FMCTI Merger. Each unvested FMCTI equity right no longer
relates to or represents a right to receive FMCTI Shares and was
converted into a TechnipFMC equity right of the same type and on
the same terms and conditions (including any minimum vesting and/or
holding period with respect to the shares delivered upon the
vesting of such awards) as were applicable to the corresponding
unvested FMCTI equity right immediately prior to the FMCTI
Merger.
(h) Represents adjustments to consolidate Forsys Subsea, the
50/50 joint venture between FMCTI and Technip.
6. Adjustments to Technip Historical Financial
Statements to Conform to U.S. GAAP
Technip’s historical audited consolidated financial statements
have been prepared in accordance with IFRS as issued by the IASB,
which differs in certain material respects from U.S. GAAP. The
unaudited pro forma condensed combined financial information
includes a statement of income and a statement of financial
position of Technip from the historical audited consolidated
financial statements as of and for the year ended December 31,
2016, prepared in accordance with IFRS as issued by the IASB. The
statement of income for the year ended December 31, 2016 and
statement of financial position as of December 31, 2016 prepared
under IFRS as issued by the IASB have been adjusted to reflect
Technip’s consolidated statement of income and statement of
financial position on a U.S. GAAP basis and translated from Euros
to U.S. dollars, the reporting currency of the combined company
using the exchange rates derived from the European Central Bank of
1.0541 as of December 31, 2016, and the average exchange rate
of 1.1066 during the twelve months ended December 31, 2016. The
reconciliation is as follows:
TECHNIP PRO FORMA BALANCE SHEETAS OF
DECEMBER 31, 2016
(In millions) Historical
Technip
IFRS to U.S.
GAAP and
Reclassification
Adjustments
Notes Historical
Adjusted
Technip
Historical
Adjusted
Technip
Assets Property, Plant and Equipment, net € 2,485.6 € — €
2,485.6 $ 2,620.1 Goodwill 3,527.5 6(f) 3,527.5 3,718.4 Intangible
Assets, net 3,769.8 (3,527.5 ) 6(f) 242.3 255.4 Investments in
Equity Affiliates 168.7 — 168.7 177.8 Investments 13.4 6(f) 13.4
14.1 Other Financial Assets 210.8 (13.4 ) 6(f) 223.9 236.0 26.5
6(f) Deferred Tax Assets 560.7 0.1 6(d) 568.7 599.5 7.9 6(e)
Available-For-Sale Financial Assets 26.5 (26.5 ) 6(f) —
—
Total Non-Current Assets 7,222.1 8.0 7,230.1
7,621.3 Inventories 317.5 — 317.5 334.7 Construction
Contracts-Amounts in Assets 460.8 — 460.8 485.7 Advances Paid to
Suppliers 675.0 (675.0 ) 6(f) — — Financial Instruments 225.8 —
225.8 238.0 Trade Receivables 1,920.6 — 1,920.6 2,024.5 Current
Income Tax Receivables 251.4 — 251.4 265.0 Other Current
Receivables 756.1 2.1 6(f) 1,433.2 1,510.7 675.0 6(f) Cash and Cash
Equivalents 5,947.6 — 5,947.6 6,269.4
Total Current Assets 10,554.8 2.1 10,556.9 11,128.0 Assets
Classified as Held for Sale 2.1 (2.1 ) 6(f) — —
Total Assets € 17,779.0 € 8.0 €
17,787.0 $ 18,749.3
Equity and
Liabilities Share Capital € 90.9 € — € 90.9 $ 95.8 Share
Premium 2,136.6 — 2,136.6 2,252.2 Retained Earnings 2,273.3 (92.0 )
6(a) 2,566.8 2,705.7 (20.8 ) 6(b) (2.0 ) 6(d) 20.8 6(e) 387.5 6(f)
Treasury Shares (22.1 ) — (22.1 ) (23.3 ) Foreign Currency
Translation Reserves 199.0 (199.0 ) 6(f) — — Fair Value Reserves
(154.4 ) 2.6 6(a) — — (7.3 ) 6(e) 159.1 6(f) Accumulated Other
Comprehensive Income/(Loss) 199.0 6(f) 39.9 42.1 (159.1 ) 6(f) Net
Income 281.3 (387.5 ) 6(f) — — 89.4 6(a) 20.8 6(b) 1.6 6(d)
(5.6 ) 6(e)
Total Equity Attributable to
Shareholders of the Parent Company 4,804.6 7.5 4,812.1 5,072.5
Non-Controlling Interests (11.1 ) — (11.1 ) (11.7 )
Total
Equity 4,793.5 7.5 4,801.0 5,060.8 Non-Current Financial Debts
1,573.4 — 1,573.4 1,658.5 Accrued Pensions and Other
Post-Retirement Benefits, less Current Portion 191.8 6(f) 191.8
202.2 Non-Current Provisions 276.2 (191.8 ) 6(f) — — (84.4 ) 6(f)
Deferred Tax Liabilities 145.9 — 145.9 153.8 Other Non-Current
Liabilities 26.8 84.4 6(f) 111.2 117.2
Total Non-Current Liabilities 2,022.3 — 2,022.3 2,131.7
Current Financial Debts 848.5 — 848.5 894.4 Trade Payables 3,684.0
— 3,684.0 3,883.3 Construction Contracts-Amounts in Liabilities
3,191.3 0.5 6(d) 3,191.8 3,364.5 Financial Instruments 556.6 —
556.6 586.7 Current Provisions 658.9 (658.9 ) 6(f) — — Current
Income Tax Payables 301.2 — 301.2 317.5 Advance Payments 390.0 6(f)
390.0 411.1 Other Current Liabilities 1,722.7 658.9 6(f) 1,991.6
2,099.3 (390.0 ) 6(f)
Total Current
Liabilities 10,963.2 0.5 10,963.7 11,556.8
Total
Liabilities 12,985.5 0.5 12,986.0 13,688.5
Total Equity and Liabilities € 17,779.0 € 8.0
€ 17,787.0 $ 18,749.3
TECHNIP PRO FORMA STATEMENT OF
INCOMEFOR THE TWELVE MONTHS ENDED DECEMBER 31, 2016
(In millions) Historical
Technip
IFRS to U.S.
GAAP and
Reclassification
Adjustments
Notes Historical
Adjusted
Technip
Historical
Adjusted
Technip
Revenues € 8,313.4 € — € 8,313.4 $ 9,199.6 Cost of Sales (6,895.2 )
3.1 6(d) (6,903.9 ) (7,639.9 ) (11.8 ) 6(e)
Gross Margin 1,418.2 (8.7 ) 1,409.5 1,559.7 Research and
Development Costs (95.3 ) — (95.3 ) (105.5 ) Selling Costs (211.9 )
212.4 6(f) — — (0.5 ) 6(d) Administrative Costs (305.0 ) 305.0 6(f)
— — Selling, General and Administrative Expenses (517.4 ) 6(f)
(517.4 ) (572.6 ) Restructuring and Impairment Expense (371.1 )
6(f) (371.1 ) (410.7 ) Other Operating Income 18.3 (18.3 ) 6(f) —
Other Operating Expenses (33.6 ) 33.6 6(f) — Other
Income/(Expenses), net (15.3 ) 6(f) (15.3 ) (16.9 )
Operating Income/(Loss) from Recurring Activities 790.7
(380.3 ) 410.4 454.0 Share of Income/(Loss) of Equity Affiliates
102.1 (3.8 ) 6(a) 98.3 108.8
Operating
Income/(Loss) from Recurring Activities after Income/(Loss) of
Equity Affiliates 892.8 (384.1 ) 508.7 562.8 Income/(Loss) from
Disposals of Activities — — — — Charges from Non-Current Activities
(441.0 ) 371.1 6(f) — — 69.9 6(a)
Operating Income/(Loss) 451.8 56.9 508.7 562.8 Financial
Income 660.2 (1.6 ) 6(e) — — 20.1 6(a) (678.7 ) 6(f) Financial
Expenses (731.2 ) 15.7 6(b) — — 5.4 6(e) 710.1 6(f) Financial
Income/(Expenses), net 678.7 6(f) (31.4 ) (34.7 ) (710.1 )
6(f)
Income/(Loss) before Tax 380.8 96.5 477.3
528.1
Income Tax Expense (130.7 ) 3.2 6(a) (121.0 ) (133.9 )
5.1 6(b) (1.0 ) 6(d) 2.4 6(e)
Income/(Loss) from Continuing Operations 250.1 106.2
356.3 394.2
Net Income/(Loss) for the
Period € 250.1 € 106.2 € 356.3 $ 394.2
Net Income/(Loss) attributable to Technip
281.3 106.2 387.5 428.7
Net Income/(Loss) attributable to
minority interests € (31.2 ) € (31.2 ) $ (34.5 )
Adjustments included in the columns “IFRS to U.S. GAAP and
Reclassification Adjustments” are as follows:
(a) Foreign Currency Translation / Derivative Instruments
Under IFRS, a non-derivative financial asset or non-derivative
financial liability may be designated as a hedge of a foreign
currency risk (IAS 39 §72). Technip’s foreign currency treasury
accounts held to finance future expenditures in foreign currencies
for a specific contract when conditions for qualifying as cash flow
hedges are met. As required under IFRS, foreign exchange gains and
losses corresponding to the effective portion of these hedges are
recorded in other comprehensive income and are reclassified from
equity to profit or loss in the same period during which the hedged
transaction affects the income statement
Under U.S. GAAP, only derivative instruments can be used for
cash flow hedges. As such, the IFRS to U.S. GAAP adjustment
represents the reclassification to income statement of foreign
exchange gains and losses on treasury accounts recorded as other
comprehensive income in equity under IFRS.
(b) OCEANE Convertible Bonds
Technip’s OCEANE convertible bonds are qualified as compound
financial instrument under IFRS and therefore, the convertible
bonds were split into a liability and an equity component since
they give the holder the option to convert the bonds into a fixed
number of ordinary shares. Moreover, the value of the liability
component at inception was recognized at the fair value of a
similar debt instrument that does not have a conversion feature.
The liability component was then accounted for at amortized cost.
The value assigned to the equity component determined at the date
of issuance of the bonds, was a residual amount after deducting
from the fair value of the instrument as a whole the amount
separately determined for the liability component. The value
assigned to the conversion feature (equity component) at the date
of issuance has not been revised during subsequent periods.
Under U.S. GAAP, the difference between the present value of the
bonds payable and the face amount is treated as a discount or
premium and is amortized as interest expense using the effective
interest method.
(c) Not used.
(d) Contract Bid Costs
Under IFRS, costs incurred before contract signing (“bid costs”)
are capitalized in “Construction Contracts - Amounts in
Assets/Liabilities” and then included in costs of ongoing contracts
when the contract is obtained, when those costs can be separately
identified and measured reliably and it is probable that the
construction contract will be obtained. From a practical point of
view, costs effectively capitalized correspond to the bid costs
incurred during the quarter of the contract’s award. When the
conditions described above are not met, bid costs are expensed as
incurred and included within “Selling Costs” in the income
statement.
Under U.S. GAAP, bid costs are expensed as incurred. As such,
the IFRS to U.S. GAAP adjustment represents the derecognition of
capitalized bid costs included within “Construction Contracts -
Amounts in Assets/Liabilities” and the expense of those costs under
“Selling Costs.”
(e) Pensions and other Long-Term Employee Benefits plans
- Expected Rate of return - Under IFRS,
companies calculate a net interest cost (income) by applying the
discount rate to the defined benefit liability (asset).
Additionally the discount rate should be determined by reference to
market yields on high quality corporate bonds in the same currency
as the benefits to be paid with durations that are similar to those
of the benefit obligation.U.S. GAAP uses an expected rate of return
on plan assets and permits companies to use a calculated value of
plan assets (reflecting changes in fair value over a period of up
to five years) in determining the expected return on plan assets
and in accounting for gains and losses. The discount rate is based
on the rate at which the benefit obligation could be effectively
settled.
- Timing of recognition of curtailments -
Under IFRS, curtailment gains and losses should be recorded when
the curtailment occurs and the gain or loss related to plan
amendments, curtailments, and termination benefits that occur in
connection with a restructuring to be recognized when the related
restructuring cost is recognized, if that is earlier than the
normal IAS 19 recognition date.Under U.S. GAAP curtailment gains
are recognized when realized (i.e., once the terminations have
occurred or the plan amendment is adopted). The guidance permits
certain offsets of unamortized gains/losses in a curtailment but
does not permit pro rata recognition of the remaining unamortized
gains/losses.
- Recognition of prior service costs and
credits - Under IFRS, prior service costs and credits require
immediate recognition in income for the effects of plan amendments
that create an increase (or decrease) to the benefit obligation
(i.e., prior service cost). Under U.S. GAAP, prior service costs
and credits are required to be initially recognized in OCI and then
amortized through net income over future periods.
- Classification of net benefit cost -
Under IFRS companies can present different components of net
benefit cost within different line items on the income statement,
such as operating expenses and finance expense. Under U.S. GAAP all
components of net benefit cost must be aggregated and presented as
a net amount in the income statement, presented in operating
income.
(f) Reclassifications
Represents certain reclassifications of historical Technip
financial statement line items to conform to the expected financial
statement line items of the combined companies, including:
Balance sheet items:
- Goodwill historically presented in
Intangible Assets, net has been reclassified to Goodwill;
- Investments historically included in
Other Financial Assets has been reclassified to Investments;
- Available-For-Sale Financial Assets has
been reclassified to Other Financial Assets;
- Advances Paid to Suppliers has been
reclassified to Other Current Receivables;
- Assets classified as Held for Sale has
been reclassified to Other Current Receivables;
- Foreign Currency Translation Reserves
and Fair Value Reserves have been reclassified to Accumulated Other
Comprehensive Income / (Loss);
- Net Income/(Loss) for the period has
been reclassified to Retained Earnings;
- Accrued Pensions and Other
Post-Retirement Benefits, less Current Portion historically
included in Non-Current Provisions has been reclassified to Accrued
Pensions and Other Post-Retirement Benefits, less Current Portions,
and the remaining Non-Current Provisions has been reclassified to
Other Non-Current Liabilities;
- Current Provisions has been
reclassified to Other Current Liabilities; and
- Advance Payments historically included
in Other Current Liabilities has been reclassified to Advance
Payments.
Statement of income items:
- Selling Costs and Administrative Costs
have been reclassified to Selling, General and Administrative
Expenses;
- Other Operating Income and Other
Operating Expense have been reclassified to Other
Income/(Expenses), net;
- Charges from Non-Current Activities has
been reclassified to Restructuring and Impairment Expenses;
and
- Financial Income and Financial Expenses
have been reclassified to Financial Income/(Expense), net.
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Investor relationsMatt SeinsheimerVice President Investor
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